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Valero asks FERC to ease Colonial shipments

05 Sep 2017 22:11 (+01:00 GMT)
Valero asks FERC to ease Colonial shipments

Houston, 5 September (Argus) — US independent refiner Valero asked regulators to waive Colonial Pipeline tariffs that it said could limit winter-grade gasoline from reaching states under emergency fuel supply conditions.

The Federal Energy Regulatory Commission (FERC) should direct Colonial Pipeline to waive gasoline specifications inconsistent with Environmental Protection Agency (EPA) waivers allowing the use of winter-grade gasoline in 38 states, Valero vice president and general counsel Richard Walsh said in a 2 September filing.

Colonial issued a notice on 31 August that while the company would comingle gasoline grades at terminals throughout the affected states, refiners and other suppliers must continue to meet the specifications of fuel grades shipped onto the pipe. Shipping gasoline that met EPA waivers, but not pipeline specifications, would require approval from customers receiving the fuel.

That rule limited Valero's ability to supply EPA-approved gasoline using the largest products supply system connecting the US Gulf coast to the Atlantic coast, Walsh argued.

"Such a tariff precondition to receipt of EPA-compliant conventional and (reformulated) gasoline is a request which cannot be accomplished in any sort of a timely or reasonable manner, especially given the current and widespread disruptions in Houston, the epicenter of the nation's energy industry," Walsh wrote.

Colonial did not respond to a request for comment today.

Federal regulations require the use of lower-volatility gasoline — fuel less likely to evaporate — in hotter, summer months. Refiners and blenders must use a narrower range of blendstocks to achieve finished gasoline in summer months. Winter months allow a wider, and often cheaper, variety of blendstocks.

EPA approved using winter-grade gasoline until 15 September to address potential shortages caused by Hurricane Harvey, which shut or reduced roughly 5mn b/d of Texas and Louisiana refining capacity. Limited pipeline and port access, in addition to floodwaters, constrained refiners' ability to operate during the storm.

The Enterprise TEPPCO system, which moves product from near Houston up through Louisiana and Arkansas into the midwest, notified shippers it would begin accepting winter-grade gasoline on 1 September.